You have really hit the nail on the head,Sherri – it’s all about mortgage serviceability. However,the way that is calculated can be very skewed.
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Firstly,earned employment income counts far more than any other type of income. Just ask.
Self-employed or small business operators are also usually similarly penalised.
If income is inconsistent,most lenders have an issue with it.
That is on the “money in” side. On the other,“money out” side,relevant is a Westpac victory over the corporate regulator in a Federal Court case dubbed the.
The ruling was that it is possible to cut your living costs after you obtain a loan,and means lenders should not have to so vigilantly interrogate your past three months of expenses to fall within responsible lending guidelines.
However,there has been little official response and the federal government’s attempts to relax tight responsible lending laws have stalled.
What many lenders now do is use a standardised “household expenditure measure” to guesstimate how much money it takes to run your life (and that of your dependents). On top of this,they may add expenses specific to you,such as insurances (life,health and income protection).
The final factor with income impact is any credit card you hold.
Recent changes mean that even if you clear your credit-card balance in full each month,an amount sufficient to repay your entire credit card limit within three years is added to your expenses,and ruled out of your income.
Do not forget that all banks also add a substantial 3 per cent serviceability “buffer” to the official mortgage interest rate they offer,to stress-test whether you could stretch to those payments if rates rise by that amount.
All that bad news aside,most lenders should factor in your child support payments.
Justin Thom,a mortgage specialist at SEQ Advice,confirms it is included by most banks.
“Just make sure your ex pays on time and his payments at least match with the court order for the past three months (for some banks it is six months). It’s also important that he puts his name on the bank transfer,” Thom says. “Typically,this income can be used,as long as it has at least another three years to run (child is not over 14 years of age)”.
Other moves that might help you to get a loan across the line is to take on an extra job for a few months,if you are self-employed,temporarily cancel insurances (making sure you can get them back,if needed) and cut up your credit cards.
However,bear in mind the three-year-to-clear rule also applies to credit-card applications,so you may never be approved for the same – or any – credit limit.
Your surest strategy may be to try changing mortgage products or ask for a pricing discount with your existing lender.
If you go armed with knowledge that the best value variable-rate mortgage on the market today is 1.85 per cent,you may be able to negotiate a better deal without the bank looking at your living expenses.
Nicole Pedersen-McKinnon is the author of. Follow Nicole on, or.